Beyond Detroit, city takeover may benefit Michigan governor

March 14, 2013|Reuters

By Nick Carey

March 14 (Reuters) - Rick Snyder's decision to put Detroitin the hands of an emergency financial manager on Thursday maynot go down well in the heavily Democratic Motor City, but theRepublican governor has the chance to go down in Michiganhistory as the man who saved Detroit.

The biggest state takeover of an American city in over twodecades comes the year before many expect thebusinessman-turned-governor to seek re-election in 2014. In anypolitical calculating, Snyder probably didn't count onDetroiters getting him to a second term.

"The people of Detroit are not going to vote for Rick Snyderanyway," said Bill Ballenger, a longtime pundit and publisher ofInside Michigan Politics. "I think there is a fairly strongmajority of people outside Detroit who feel an emergency managershould be appointed."

For fixing the finances of the majority black city, Snydertapped Kevyn Orr, an African-American lawyer and life-longDemocrat who studied in Michigan and specializes in corporatebankruptcy. At his presentation to the Detroit media onThursday, Orr acknowledged the political pressures on Snyder,including from those who asked why he was spending so much timeon Detroit.

He said the governor told him, "It is the right thing to doand the right time to do it."

In his first political office, Snyder, the former chiefexecutive of venture capital firm Ardesta, has earned thereputation in the governor's mansion as a businessman who getsthings done, with little regard for the political fall-out. Hiscampaign to rescue Detroit has the tone of an impatient CEO,employing the slogan "Detroit Can't Wait."

Orr's appointment will likely usher in a new period ofpainful cutbacks for a city long in decline, but he said hewants to avoid sending Detroit to bankruptcy court. Such afiling, if allowed by the state, would be the biggest Chapter 9municipal bankruptcy in U.S. history.

'NO DOWNSIDE FOR GOVERNOR'

Formerly home to 1.8 million people, Detroit once hadsignificant electoral muscle in Michigan. But Detroit'spopulation has fallen to around 700,000 people, or less than 8percent of the state's population, and the city has less supportin the state capital, Lansing, than it did during its heyday.

The former automotive powerhouse's decline has long beencompounded by financial troubles that are almost as well knownas the music that made Motown famous.

"Make no mistake, Detroit is bankrupt," said Jim McTevia, aspecialist in restructuring and managing member of managementand financial consultant McTevia & Associates. "In this set ofcircumstances there is no downside for the governor.

"I think Snyder will be remembered as the politician whosaved Detroit."

Cuts by the administration of Detroit Mayor Dave Bing tostave off the appointment of an emergency manager werevigorously opposed by some members of the city's council.

There have also been small protests in the city over theprospect of an unelected official taking over Detroit's pursestrings. Pastor D. Alexander, a local leader of Jesse Jackson'sRainbow PUSH Coalition, said Snyder would suffer for a takeoverif he runs for a second term in 2014.

"Governor Snyder risks wakening a sleeping giant," he said."If Detroit comes alive, he will not be re-elected."

On Thursday, flanking Snyder and Orr, Bing showed hissupport for the emergency manager, saying, "There is no doubtthat we are going to work together."

'PRAGMATIC, NOT DOGMATIC'

McTevia, the consultant, said a crucial point for Snyder isthat any emergency financial manager will need help from cityofficials to succeed.

"This will take team work to fix," he said.

Michigan's governor also has the support of much of thelocal business community, which has applauded his support for anew bridge to Canada, which many conservatives oppose, and forregional transit and lighting authorities in Detroit.

"The reason why we are so supportive of the governor is thathere's a Republican who has clearly chosen to support Detroit,"Sandy Baruah, chief executive of the Detroit Regional Chamber ofCommerce. "Governor Snyder is very pragmatic, not dogmatic.

"He's all about getting stuff done."

Lyke Thompson, a political analyst at Wayne StateUniversity, said that while taking over Detroit's finances"could be a win" for Snyder if the move is successful, theopposite would be true if the city ended up in bankruptcy asthat "would happen on his watch."

"Things could get worse before they get better," he said.

Whether or not Snyder worries about what effect a statetakeover would have on his re-election chances in 2014 isanother matter. His office did not respond to a request forcomment.

Since taking office in 2011, Snyder has frequently annoyedsmall-government conservatives, as he did last month with a planto expand Medicaid and raise the gas tax for road repairs.

The governor also incensed liberals and the labor movementin December by signing "right-to-work" legislation that allowsworkers to opt out of union membership.

"I think the governor looks at issues through the eyes of abusinessman and looks for solutions," said Pat O'Keefe, CEO ofturnaround consultant O'Keefe. "I don't think Rick Snyder caresone way or another if he doesn't get reelected.

"And if he is successful he will have essentiallyestablished the blueprint for restructuring a major city'sfinances."